orice charged to the distributor? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 What is your interpretation of the changes to the contribution rnargin per unit and the operating income on account of the unit price charged to the distributor? (Do not round intermediate calculations.) In order for the company to increase its operating income $60,000 above what it would be without the order, the contribution margin per unit included with the special order must be $2 per unit more ($2 × 30,000 units = $60,000) than the normal contribution margin. The normal contribution margin is the sales price, $28, less all variable costs [ +(2/3 x 1, or $12. Thus, the selling price of the special order must cover the additional shipping costs, and still result in a contribution margin of normal + $2 additional requirement). Therefore, a selling price of is required. < Req B1 Req 82 1 of 4 ... < Prev Next > ... NOV 17 étv li 1 A
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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